Got a tricky question? Receive an answer from students like you! Try us!

on stock return, portfolio and risk management - Assignment Example

Only on StudentShare
Undergraduate
Assignment
Finance & Accounting
Pages 4 (1004 words)

Summary

Identify the components of a stock's realized return.
A stock’s realized return is represented by the overall gain an investor obtains from an investment. The reason people invest in common stocks is to make money. The primary components of a stock’s realized return are capital gains and dividends paid out to the investor…

Extract of sample
on stock return, portfolio and risk management

The dividends an investor might receive could be either a cash dividend or a stock dividend. To calculate the stock realized return you have to add the capital gain obtained at the moment of sale and the total dividends received while the investor held the common stock. The addition of these two variables would then be divided by the original price the investor paid for the stock or lot of stocks. This calculation would give the gross return. The net return is calculated by subtracting the tax expenses associated with the investment from the numerator of the formula. It is important for investors to periodically calculate the return they would achieve if they sold a stock at a particular point in time. This can help investors determine when it is the best moment to sell their stock investment. 2. Contrast systematic and unsystematic risk.

There are two types of risks that investors must pay close attention to. The two types of risks are systematic and unsystematic risk. Systematic risk is a risk factor that cannot be control by the investor or the firm due to the fact that it is a market inherent risk. These risk factors affect all firms. Some examples of systematic risks include recessions, wars, inflation, and the occurrence of natural events. In the aftermath of the March 11, 2011 earthquake in Japan the valuation of most Japanese stocks when down a lot. This risk could not have been predicted by an investor. Unsystematic risk is also referred to as firm specific risk or diversifiable risk. Unsystematic risks are risks that can be controlled by the firm. ...
Download paper
Not exactly what you need?

Related Essays

Investment and marketing: answering the questions
Many large clients seek the services of an investment bank precisely for this reason, as the collective knowledge base of the financial sales experts in the group should allow the client to gain a preferential entry and exit point for market trades. However, financial sales staff can also abuse this inside knowledge, as for example, Goldman Sachs did in creating the Abacus tranche of mortgage bonds for hedge fund trader John Paulson which were designed to fail, but sold to pension funds, private investors, municipalities, and other investment banks as legitimate long-term investments while…
11 pages (2761 words)
International Management Accounting: Answering Questions
Answer: In the era of merging cultures and competition in businesses, the criticality of management role and decision-making strategies has increased significantly. Decision making on the basis of estimates and assumptions has far been obsolete. The need of a systematic approach for decision-making has been felt, by companies and organizations to improve the authenticity and accuracy of the decisions made (Gelinas et al., 2010). This need urges the researchers and analysts to devise a methodology, which covers the useful data and information about the company’s revenue, loss and…
11 pages (2761 words)
Financial and Accounting Questions
include a systematic representation of all the financial transactions carried on by an organization. These financial transactions are first identified, recorded and then communicated to the interested users in the form of financial statements. The users can be either internal managers of the organization or the outsiders like the stakeholders of the company (Kimmel, 2011, p.5-6). Out of many uses of these financial statements to its users, decision making is one of its most crucial aspects. Interpretation and financial analysis of these financial statements facilitates decision making process…
6 pages (1506 words)
Financial Information: Coursework Assignment
The company has also recently initiated its telecom and data manager and distributions business lines (Bloomberg 2012). The company sells its products and services through its physical stores and also online ecommerce solutions to its millions of customers worldwide. The company operates for achieving its visions that is “to create value for customers to earn their lifetime loyalty” (Tesco Plc., 2011) and deliver its values “no one tries harder for customers and treat people how we like to be treated” (Tesco Plc. 2011). Auditors Report and its Importance The auditors of Tesco Plc are…
5 pages (1255 words)
Financial Resources Management Assignment
Assumptions There is an already decorated room that will save the department on the cost of building and decorating. The university has the required resources to fund the project comfortably. Plans Investing in this project will cost the university in the short term, but the benefits will come in the long term use of the room. This can be seen when the students begin to make full use of the facility is when we will see its benefits. As usual, costs will have to come before the benefits of the project are visible for all to see. Like any other venture, the project will need sufficient financing…
3 pages (753 words)
Financial Reporting Assignment
The involvement of the all stakeholders, the identification of the economic status, financial identification and effective transmission of the components of the financial reports outlines the main characteristics of effective and good quality financial reports (Helen and Gary 2001, P. 57). Although conventional financial statement systems are still effective in providing financial reports in an organisation, the adoption of contemporary financial reporting techniques and policies have proved to be more valuable and cost-effective. Organisations provide financial reports to facilitate the…
9 pages (2259 words)
Financial Economics Assignment
In order to apply the capital asset pricing model it is assumed that the investors are rational whereas the investors are not rational and all the investors does not have same information. There are cases in which the investors gets an inside information related to a certain investment and thus invests in that investment. One of the major limitation is that the investors can borrow or lend any amount for any period of time at the risk free rate which is not possible in practice as there are limitations and restrictions and it is difficult to determine the risk free rate for a long period of…
4 pages (1004 words)